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tv   Bloomberg Markets Americas  Bloomberg  April 20, 2017 2:00pm-3:31pm EDT

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scarlet: we are covering stories out of washington and brazil. here are top stories we're following from around the world and we begin with markets. dow rising from a two-month low a strong earnings from america and. the dollar and treasuries are declining but oil is recovering after suffering it biggest drop in more than a month. in politics, the national economic council director expected to speak at a summit in washington this hour trait we will bring you what he has to say on tax reform, trade,, and regulation print virtue financial shares surging after the company announced plans to buy a rival casey. the ceo joins us with what the tie up means for the high-speed trading industry. let's stay with markets. u.s. stocks close in a few hours
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time. abigail, what are session highs? the dow, s&pave 500, nasdaq all sharply higher. up 1% on pace for their best day since march 1. the s&p 500 on pace for its best weekly gain. the first weekly gain in three weeks. the best weekly gain in 2 months. the nasdaq on pace for yet another record closing high. certainly a bullish day. we havehis, strengthened financial straight american express up more than 5%, on pace for its day -- it's best day since october 20 of last year. investors clearly like that, plus there was nice acceleration in growth around the company's credit card, commercial credit card business, volume three by 6% rate we have the regional banks, see corporate citizens trading higher. these companies also put up solid first-quarter, top and bottom line estimates spread
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let's turn to a stock that is spiking higher after comments of treasury secretary steve mnuchin, spiking down just a little bit more great initially of 2% after steven mnuchin did say that fannie mae and freddie mac need to be fixed. a little bit of reversal there. interesting to look at that great sticking with the theme of government-backed bonds, let's look at sallie mae. sallie mae is the student loan servicing company of government-backed and other private education loans, up 10%. huge pop on the day, they put up a big quarter. they beat earnings by 39%. they put up $.21 per share in adjusted earnings great let's hop to the bloomberg and take a look at the chart straight it may help explain why sallie mae was able to put up such a big .uarter it shows three different types of debt. inwhite we have credit card, blue we have autos, and then in yellow we have student loan straight there's been lots of
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talk about the idea that there could be some subprime auto crisis, the we see that auto below the student debt at $1.3 trillion. huge numbers here climbing. is it it -- it is a positive for sallie may. interesting to take a look at that. scarlet: they do so much, abigail. virtue agreed to by its rival for $1.4 billion. the stock traded less than $14 before the bid was announced in march. today it is surging 11% to about $19 a news of the deal. for two also jumping. joining us to discuss the deal is the ceo of virtue. thank you for joining us on the big day. let's talk about why this deal makes sense right now. what makes this the right time to do this? >> you are seeing more efficiency in the market
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combined with less volatility, putting pressure on margin for every participant. casey g has this wonderful customer franchise they've had for a long time and we have an efficient market structure, combining the two we think we will get best in class of both. scarlet: you mentioned volatility has come way down. is this an admission that decline in volatility is a structural issue? >> i don't think it's a structural issue. we've been in a couple quarters .ow with realized volatilities that was a catalyst for us to say, this is a time for a from like ours that has asked in class operations. maybe look at some of the landscape and say, are there firms we think we can add efficiency to provide a better product, ultimately, to the buy side and institutional investors? oliver: systematically low volatility, even though despite there's a lot going on, the vix remained low. look at the landscape for competition in the industry and
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pushing margins very close, very small in terms of trying to beat out the competition. does this signal with this type of m&a that it is a winner take all industry? inwhen we started virtue 2008, my partner and i, we have to be global. we have to have scale. you have to provide prices across asset lasses and geographies -- classes and geographies. wonderful customer franchise on it institutional market making side and agency side, really concentrated in u.s. equities where there has been an increase in cost, decrease in volatility, really put pressure on their margin. we think we can take that model and stable gasquet lit more globally. scarlet: what level of m&a are you bracing yourself or in the high-speed trading industry? to what extent is that connected or inspired by the more pro-business agenda of the white house? >> that's a great question. you will see firms like ours that are able to scale the
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business and have efficient ability to provide a good offer spread. the question is, do we acquire or let these firms kind of flounder? i will be an interesting question we will face -- that will be an interesting question we will face over the next couple years. firms trying to change their strategies. when there's not a lot of volatility in the market, not enough opportunity in the market for everybody to be successful, so you will see larger players, like virtue, it are consolidate or continue to grow. and the smaller guys that are maybe more nichey, maybe in a single asset class, they will struggle to continue to private -- provide the margins to their owners. scarlet: you are still looking than. >> absolutely. we're still in the market. people said two years ago, michael lewis, you have a book. why would you guys put yourself out there to be public? today you see why. oliver: we talk about overlap. let's see where some of the -- comes from.
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this could be a $200 million in terms of net savings. there will also be comparisons here that overlap. will beasiest cuts around technology and infrastructure. we don't have to pay market data twice through exchanges. we can reduce our footprint because we consolidate strategies and data centers. those are the things we will be looking at day one. we run a leaner firm in terms of people. we have a lot more people than we do. we will look at that. it will be, what is the best in class? how can we provide the right service? we bought a customer facing franchise. we're not going to screw that up customerver: with that base, is infrastructure ready to handle all the client flow? how long will it take until you have the technology that can handle all of kcg's clients? technology, ont the front end, with the customer interfaces, how they see it in
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-- you not only look at m&a but now that you bring onto a business you didn't have before -- >> we don't necessarily worry about competition, we try to be excellent in what we do. there.t firms out our wholesalers are providing market-making services to retail institutional customers that our competitors of ours. we don't fear competition, we try to be as competitive as we can be. is aet: you mentioned kcg customer facing side of the business. what do you expect to be the biggest challenge in absorbing this business? >> we are a small organization. we have 150 people. they have been around for longer, they are much more embedded in the financial services. we have to be really humble and
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modest. you can't have a culture where it's us against them. thye've won a major transaction a few years ago. we made it clear on day one, it's one firm. in any m&a transaction it will be an issue. i have experience in doing that and we will be humble and try to learn from the great people at kcg. they have a great and unique franchise. that's what we wanted to buy for that. ofver: what is the prospect a type to regulation in the united states mean to you now that you have this other side of the business, and perhaps there will be a push towards people having to allocate specifically? >> is a great question. that is one of the catalysts. a fabulous institutional practice, institutional agency business where they have literally hundreds of customers. we got less than 10 customers. we have a great product, in an execution only environment we think we can be exceedingly competitive. we have regulatory tailwinds behind it, we think marrying the algorithmic business we have,
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post-trade analytics we have with their extensive client base, we can build a winning product, particularly in it post world where transaction analysis is going to win. oliver: what if it doesn't come through? is inst of all ,kcg europe and we are in europe and we want to be there. when you talk to the institutional money managers, they save we are going to do it in europe, we are going to do it and the united states. the big institutional money managers are saying, you have to provide quality. we think we are going to win in that proposition. oliver: it sounds like he will be back to talk about m&a in the future. and ceo of virtue joining us spread let's get a check on bloomberg first word news with mark crumpton. trump saysdent administration will restore u.s. prominence to the steel industry and level the playing field for its workers. he spoke today at a white house meeting with american steel executives. pres. trump: we going to fight for american workers and
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american-made steel, and that's beginning immediately. for decades, america has lost our jobs and our factories to unfair foreign trade. one steel mill after another has been shut down, abandoned, and closed, and we are going to reverse that. mark: the president also signed a memorandum to speed up a study on whether steel imports are hurting u.s. national security. utah republican congressman jason chaffetz may leave congress before his term expires. radio insult lake city today that he is weighing his options", might depart early. yesterday the chairman of the house oversight committee said he would not run for reelection or for any office in 2018. decision was not based on either health or political concerns. arenuel macron's rivals trading their fire on the newcomer.
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nationalist marine le pen and republican francois fillon both attack at the 39-year-old former economy minister, saying his ideas are weak and vague. a new french poll finds support to macron goes one point 25%. fillon scored one point, 19%. tune in to bloomberg this sunday for our special friends decides, one less cover of the election. millions of millennials are living at home, their parents' home. half are white and the majority are male. the census bureau's recent findings contrast with the 1970's, the more young adults lived with a spouse. about 1/4 of today possible annuals are not -- millenials are not in school and don't have a job, but the majority tend to
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be in college or graduate school. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. scarlet: the imf sees results growth rebound in 2018 but challenges remain for latin america's biggest economy. the finance minister of brazil will join us in washington. ♪
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the country's road to recovery hinges on facing political uncertainty, easing monetary policy, and progress on
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the government's economic reform agenda. let's head -- had things over to erik schatzker, who's in washington with a central player in brazil's future. erik: few men could be more central to brazil's future than the finance minister, who is here with me in washington. thank you very much. good to see you here in d.c. welcome back to the united states trade let's begin with pension reform, and issue critical to result was future. you and the president are working hard to catch this -- pass this pension reform bill. event to make concessions to win support -- you've had to make concessions to win support. savings are now lower than they would have been when it was in its original form. if the room to make further concessions it necessary? when we present the reasonable proposal, we already dutchans to have some
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what you are mentioning as concession. actually it is changes proposed by congress. that, market was already priced in something like fiscal benefits of the outcome in proposal of about 70% of the reasonable proposal. as it is today, according to us being proposed today to the commission. 75% over 10out originaliod of the one, and 30 years, 72%. i guess what i'm trying to get a sense of is, do you feel,
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to negotiatequire, more, that there is room for negotiation, or do you have to set a limit? "the new york times -- henrique: i think we are close to the limit or at the limit. erik: so the savings of 630 billion, that is 600? what's the limit? henrique: the limit a little over 600. there is not much room. that the moment the report is approved by the special commission, it's much harder to change it in the house. .rik: numbers are one thing but there are other considerations in this bill. it was supposed to eliminate but you'velities, had to negotiate away some of that as well. you had to make some concessions to teachers and police officers. is there a limit to how much you can sacrifice in the way of principle, or is any pension
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reform bill that saves money worth passing? thatque: the idea here is the most important point in terms of inequality is the fact of those whohe 20% make less income, the bottom, which is 20% of the total workers in the country, those are already retiring by age, because they don't complete their contribution requirement. that means that the ones who you lose, basically the higher paid one. that is the most important equalization, and that is prevailing. erik: this week the imf raised its growth forecast for brazil to 1.7% in 2018. an important vote of confidence trick the whole world is still waiting for your country to
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emerge from recession. do you estimate of the economy grew in the first quarter, or is it possible that growth was still negative? henrique: our projection is quarter over quarter, .5% to .7% growth, first quarter over fourth quarter of last year. idea is that rate to be kept, and we expect to have less quarter of 2017 over last quarter of 2016, with 2.7% growth. erik: on an annualized basis? henrique: no, last quarter over last quarter. erik: i see. private sector economists are expecting growth of 0.4%. what about you? henrique: true. that's because of the
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statistical -- statistical carryover. thenave a steep decline, you start going from a very low basis. even if we grow very fast, average against average, for what you are talking about -- but if you take to beginning of the year against the end of the year -- erik: but you are on record as predicting 1% growth of 2017. does that still apply? henrique: no, our projection is in for 2017, 1/2%. .5. erik: is that a new forecast? henrique: no, it was published a few weeks ago. the idea here was there was a becauseon the average, higher than expected decline in the gdp in the last quarter of last year. erik: this is what confuses
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people. forecastingu were 1.6% growth. then you took that forecast down to 1%. why is it that you and your ministry consistently overestimate the prospects for the economy? what's wrong? whole market, most of the economies have the same kind of projection. thateason is, the fact brazil had a much worse than expected recession last year, and then gdp declined further. as a result of that, we had a lower basis we started. and then comparing average against average, it is smaller growth. the good news is, we are starting on a very strong weight. month, we are ready
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to see very strong growth. the reason for that is because the companies were deleveraging themselves last year. and that made the resurgence worse in the short-term. henrique: we thank you-- oliver: we thank you for your time. this is the finance minister of brazil here with us in washington. up tomorrow, we will be hearing from finance ministers from countries including sweden, columbia, and saudi arabia. this is bloomberg. ♪
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scarlet: time for a look at some of the biggest business stories in the news right now. is partase of dividend
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of a corporate makeover trading him to be profit and sales expectations and the new ceo has pledged to quote, achieve a new level of financial performance. born buffett prospered sure how the way is voting all its wells fargo shares to support the reelection of the bank's board. an assistant to buffett says berkshire, wells fargo's largest investor with a stake of about 10% already voted most of the holdings, and the billionaire is a voting his personal shares great wells fargo's board is also under pressure after proxy advisors urged investors to oppose the reelection of 12 to 15 directors. that is your business flash update. from new york, this is bloomberg. ♪
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scarlet: from bloomberg world headquarters in midtown manhattan, this is "bloomberg markets." we are going to start this time with cocoa falling to a
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nine-year low as momentum sellers pile on. cut the price has by 42% this first year. cocoa producers are planning an emergency meeting on prices next week. oil bouncing around today after yesterday pledging as much as almost two dollars. the fluctuations come as major producers reach an initial deal to extend output cuts, according to the oil minister of saudi arabia, who did not identify the countries involved in the deal. oil is currently down 1/3 of 1%. for a longer-term view on oil, let's show you a chart that's available on the bloomberg. the blue line shows the price of back toing all the way the early 1980's. the white line tracks u.s. oil production as a percentage of opec production. 1986,s. share peaked in then it was down. it bottoms at about 2008 and since then it has been on a steady rise on u.s. shale production, about 29% of opec's
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production overall, making it harder for cartels to counsel the global oil gut. -- glut. they asked for his views on the key factors driving prices. >> one of the key things that has been happening in global commodity markets is we've had a pretty strong dollar. the strong dollar has been a big headwind for oil. part of the strong dollars come from the weakness in the eurozone. some of that seems to be reverting. british pound had a big move up because of the election call, which was viewed positively. importantly, on france, if we get the right result, there's a market spike, we will see recovering the euro, and that's very important because it will probably mean we get softer u.s. dollar backdrop, and that is a positive environment for commodity markets.
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everything else -- if you look at emerging-market data, survey that pmi's, we do need french election confirmation to push both the euro higher and together with it, commodity prices on oil. >> what is the correlation between dollar and oil? i'm looking at the correlation over the last 120 days. it's pretty much zero. the broader commodity basis is 0.2.negative >> it depends how you look at the correlation. sometimes oil leads foreign, sometimes the dollar leads oil. and 2015,k at 2014 thewas pretty much leaving dollar index -- leading the dollar index. what i'm saying now is, part of the reason oil -- the drop in oil prices was impacting the u.s. current account possibly.
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the u.s. is a big net importer of oil and energy. a lapse in oil prices was actually enabling the u.s. for the same number of dollars. but that could actually start to change if the euro recovers, and i think the euro has been under a lot of pressure because of internal domestic politics in the eurozone. that's one of the reasons we are more responsive within the correlation structure. that is our view and that is why we see it more positive. i agree, correlations can be close to zero for four, five, six, seven months. over the longer period, they tend to be longer than that. >> what is the downside risk for oil at this level? >> i think the biggest challenge is that inventories are not coming down the way they hoped. >> -- >> there are some products where there is -- real market
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tightness straight you think about things like propane and butane, for oil and cooking at home heating. we've had spikes in those fuels in the past 3, 4 months. we just haven't seen that through the entire channel. part of it has to do with the fact that demand in emerging markets has been very soft. you might say, why is this so soft? growth has been soft. the politics are kind of in the way a little bit. we need to see incremental pickup in global trade flows, and pickup up in industrial activity in emerging markets to see useful consumption and oil price floating higher with it. that's really what drives oil. big picture demand, it's about jet fuel and gasoline. so far we've had strong jet fuel demand. driving not as strong. demand for trucking really has been quite soft. >> that's on the demand side, which will go up and down. scarlet: we want to interrupt
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and bring you to washington, d.c., where the -- where gary cohn is speaking, taking part in a conversation with the summit president, and he are timothy adams over the international finance policy summit. >> is a lot more difficult to get there. and the process is a lot slower. i'm adapting to the slower process. >> i always knew you as someone who like to execute quickly and well. let's start with 100,000 for the level. that is your policy agenda, questions about priorities and what you want to achieve. .ots of expectations i think it's getting a bit of a bad rep. it's tough to get things done quickly. tell me where we are, it is the 100 day mark. tell me what the next few months holds for you. >> our agenda hasn't changed. when we came in day one we talked about an agenda that revolved around jobs, job
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creation, employment, full employment, making the lives of citizens of this country best. that is our number one objective. how do you do that, that's all we are working on. we are going to do it in a bunch of different ways. number one, trying to improve health care in this country. we think that is a staple of quality of life. number two, we are trying to change taxes and tax reform. number three, you just had a panel talking about infrastructure. the way we live our lives, the way we get to school, too and from work, is really important to we have a sub optimal infrastructure in this country. those are three cores we're working on trade we do that in terms of how you live your life and how we create jobs. an top of that, simultaneous to those, we are talking about the regulatory environment. the regulatory environment comes across all of that. i was listening to one of the guests at the end, approval processes. the approval process in the regulatory process infrastructure is probably the
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most -- art of regulation, in slowing down the approvals. it just adds and adds to the cost of infrastructure. we have to understand the cost of regulation, and slowing things down. and so we are simultaneously looking at all the different regulatory environments we have, not just financial services. concerned about financial regulation. we have regulatory burden in almost everything we do. we are spending a lot of time looking at the regulatory burdens as well. >> on our first panel this morning a number of economists said, the deregulation piece is important. maybe it is overshadowed by the tax discussion or health care. your cabinet secretaries once they are placed, and move quickly on the d regulatory piece. >> a lot of it is personnel. a lot of it is interpretive personnel, getting our personnel in the position that will help
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us on the deregulatory agenda. we inample i like to use, the united states have a stress test for our banks. europe has a stress test for their banks. the dialogue or description stress test is different. it's not that much different. the interpretation of the regulators to interpret the stress test is so different than a bank in europe with 3% tier one capital passes their stress test with flying colors. basically the united states with 10% tier one capital barely passed. personnel is policy, and changing the personnel will change the policy, change the interpretation. we think that is important. changing the personnel will have a big effect on a lot of the regulation that we have in this is a him, even when you look at infrastructure, you look at the bureau ofook at the land management, fish and wildlife, all these organizations and how they are running approvals through their
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processes, how they look at the approval process, how they schedule, just getting those things done and feeling the necessity, that's all personnel. we have instructed our people that we have to get these things in the system. deadlinery and force a system into place so we make sure we get things through the system as quickly as we can. >> you still rely on our friends at the other at a pennsylvania avenue. article on the constitution puts congress squarely in charge of taxes and appropriations. so tax policy. how are you approaching it? i know you're developing your own set of proposals, you have one in-house now with the speaker ryan, and share brady. how do you assess that proposal? you have principles you are abiding by? know that secretary mnuchin was here a second or two ago and he spent a lot of time. he and i are spending a lot of time working together on tax
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policy. we are going to come out with a unified, united tax proposal from the white house. >> it includes individual as well as corporate? >> yes. some of the basic corporate individuals are getting what the president ran on. people say we are difficult to figure out what we're doing. we are the opposite trade if you want to understand what the white house is doing, go back and listen to what the president said on the campaign trail. he talked about low rates. we care about low rates. we talked about simplicity. we care about simplicity. he talked about using the tax code to make america more competitive. we want to figure out how to use the tax code to make america more competitive. he talked about reciprocal taxes and reciprocity and making our tax code more in line, making us more equal. he talks about using taxes to make sure we are globally competitive, bringing industry and jobs back to the united
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states. that is what we are trying to do. we are trying to do it in the corporate tax code as well as the individual tax code. >> one of the proposals in the ryan brady plan is to eliminate the deduction of interest for corporate, leveling the playing field between debt and equity. have a given issue is that for markets? -- have a given issue is that for markets? it's impacting the economy. is that a live proposal? >> as secretary mnuchin said, we have a lot of things on the table. we are working with all the different levers. as you know, depending on where you end up on the rate spectrum, depends on how valuable or how one valuable a certain -- unvaluable a certain deduction is or isn't. we are continuously playing with the levers we have, and working on coming up with a policy. >> we will have director mulvaney here later today. dick cheney once famously quoted whend reagan as saying,
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you think about your tax proposal, how important is it to have revenue neutrality? >> we did hear about the importance of dynamic scoring. how big of a role to that play? >> director mulvaney will be here later. he will have his very strong views on deficits. so you can save your big deficit question for him. have a legislative process to go through on tax reform. you pointed that out. we would like to have permanence . when corporate's are making long-term -- when people are deciding to move businesses to the united states and open capitals and make big investments, they need some permanence of a tax code is a more permanent we can make the tax code, the more it makes sense to us. running a big deficit in the tax code would potentially make it not permanent. if secretary mnuchin said, using
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anamic scoring may allow us permanent solution. we would like a permanent solution. we have to do what we need to do to drive job creation and drive the economy. and we are committed to drive the economy. >> we were talking about infrastructure backstage. i was making a joke this morning, every time i go to new york, it's a harrowing experience. tell me about your plans for infrastructure and how are you going to divide between tax credits versus direct appropriations spending? >> we talked a lot about infrastructure. our core basic plans when we started, we talked about health care, taxes, infrastructure in that order. part of our tax plan may be to use some of the repatriated money into an infrastructure fund or infrastructure bill. so we know that we are going to fund some of the infrastructure.
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director mulvey and he will tell you his budget, he has fairly substantial allegations in for infrastructure. the government will have to be involved in the infrastructure. that said, we think bringing private capital in a long side with the government, or even privatizing infrastructure, makes an enormous amount of sense. building up the government plus balance sheet for the sake of building up the government's balance sheet doesn't make the most sense. if we have existing infrastructure that has direct attached to it, we think there may be very in ideas in the for-profit or not-for-profit world, to take that infrastructure and put it into corporations and use more of the capital markets to pay for that instead of putting it on the government's balance sheet. we know it will create long-term, better management. it will create a maintenance program brady will do the things we need to do for an efficient long-term infrastructure management program.
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we do not want to sit here as the federal government and be a piggy bank doling out money here, there, and somewhere else. we want to be a partner. with mayors, municipalities to cover them and kill invest along with them on projects that they want to put capital. >> -- >> as most of you know, there's a huge state and local. the federal government owns very little infrastructure. we control almost all of the infrastructure. we control almost all the permitting process. >> how do you ensure it is spent in the right place? rogers is from southwestern, southern kentucky. most beautiful highways in the world. unfortunately there are no people. how do you ensure you are not building bridges to nowhere, you are actually putting asphalt and bridges with a population is? >> that's what i was alluding
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to. we don't want to be in the business of just doling out money. we want to be in the business of investing in infrastructure or other people, the states, municipalities, authorities are going to put their money with us. knowing they will need to get a return on their investment, they will need to get a return on their capital. hopefully would make sense to bring in other partners, because we don't want to build a bridge to nowhere to say we built it in an appropriation. we want to build a smart infrastructure where we are going to change people's lives, where we are going to make it into work easier, getting to school easier, flying across the country easier. >> this privatization include the air traffic control system? list.have a it's not a complete list. i have talked fairly openly about the system. the atc system is sort of a bellwether example of something
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that can be done and should be done. on leading edge to do this. we are following what a bunch of other countries have done. over 50 countries have done what i'm proposing we do. there's a direct attributable revenue stream already, dedicated to air traffic controller. if you put the atc components into a private business, whether for profit or not-for-profit, build the technology, modernize the system, the revenue is there, the technology is there, the opportunity is there, and it will change everyone's life. we will speed up times, you won't sit on carmax as long. your flight won't go down. the dissent patterns won't go down. you drop from 20,000 feet to 15,000 feet. you will have direct descent in the airports.
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airports andtain the united states that have built that technology. you won't go from waypoint to waypoint that is out of the way. you will save jet fuel in the process. saving jet fuel is cost efficient. he will consume less energy in this country. it is environmentally very friendly. it makes an enormous amount of sense. last time i flew la guardia, we were number 37 in line to take off. we sat in iowa for 3 hours. whatever you can do -- >> i won't even guess what percentage of jet fuel for that trip you used on the ground. every time you start and stop, to get that hunk of steel moving again takes a lot of jet fuel. >> what is the timing on something like that? if that's something you hope to get done in the second half of the year? >> what does get done mean to you? [laughter] >> it is washington, after all. >> you mention energy policy. >> we are moving that one
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through the system and we've been working with secretary chao. the good news here is, the house members have enormous desire to do this. we've been working with many of the house members. this is an air transportation bill they've had on the board for a long time. we are working with a house that wants to work with us. there's very little opposition of what we want to do. that said, this will take years, not months to get done. goodcretary mitchell has connections. you mention energy policy. can you mention how you see this going forward? the president spoke intentionally about coal. changing the mix, and were you doing about climate? >> we are supportive about jobs again. we know that coal is a job
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creator in the united states. but we have to allow cold to compete. we are also a big supporter of natural gas, a supporter of fracking, of energy independence . we are supportive of the free market. those things have to work together, and different feedstock have different economics to them, and we are allowing the free market to be the free market and the biggest issue for us as an administration's energy independence and making sure we can control our own destiny. >> for the u.s. in north america? >> for the u.s. for sure. we are most concerned about the u.s., but then we care about north america, imported oil. we are starting to export some of these things are good, you are building up more and more lng terminals in the united states. we have and to have a feedstock or btu component the rest of the world needs.
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we have huge access supplies of gas, so we will permit more and more of these lng plants. we are going to let these different feedstocks competes in the united states here and we will be supportive of them part of creating jobs and manufacturing in the united states is, what is your competitive advantage should mark we have a big competitive advantage. we have cheap energy and we need to keep and promote our cheap energy and use it as a competitive advantage. >> so we are still relying on oil for the transportation system. how do you feel about oil -- i know there has been changes to the cafe standards, relaxation of the standards of the previous administration. is that something you are looking at as well? >> we know oil will be a major component of everything we do, of the transportation industry. it should be. it's going to be. but when you are displacing it into the energy sector and power sector, it is the marginal
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barrel of oil that sets the price of the entire oil stack every day. every marginal barrel you don't consume is one more barrel of supply you have in the system, you are affecting the price of the whole system, which we find very good. we are very good for manufacturing in the united states, makes us more competitive. we do very much care about the environment and we want to do this in a very environmentally friendly way. >> we had more defined cell on this morning. the luminary proposed a carbon tax. i assume that's not in the mix, or not something you think congress is willing to take on at this point? >> it's not in our mix. >> trade policy. as lots of questions about this administration's policy. there's a cacophony of voices coming out of the administration. can you show me how you approach trade policy? what is your philosophy, and was the philosophy of the president? >> free, open, fair trade.
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>> what this fair mean? >> we treat our trading partners the way they treat us. the president calls a reciprocal. we should be reciprocal in the way we treat each other. we would prepare the no one has terror, that we have free and open trading border. if you want to insist on having a product, which we prefer you do not, the president believes we should treat it in reciprocal fashion and tax your product coming into the united states. that is free, that is open, and that is fair. the example he will use, and it's a good example because it's going on in the world today, is cars. if we manufacture a car in the united states and ship it to certain countries, they put a large tariff on that car. if they manufacture a car, they can send it to the united states for a small tariff. that's not fair. >> where do you think you can
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make the greatest gains? i will tell you about imports in a second. are there places that are low hanging fruit that you think you can make immediate gains? >> on our exports? yes. we can increase exports everywhere. better andming a better manufacturer. we have cheap energy, better technology, as we continue to improve our infrastructure, improve our availability to get things to market, we will continue to leverage upon those weets of our economy, and will be a better and better exporter, but we have to do it on a level playing yield. >> lots of talk about manufacturing jobs. it's only 10% of the economy and the workforce. we run trade lessons in surpluses. when we hear more from the administration about services and financial services is a comparative advantage for the
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u.s.? >> maybe we're just not talking loud enough, but we are talking about it. when we were in florida 2 weeks ago, talking with the chinese, we were talking a lot about them opening up more to our service industry, giving our u.s. companies broader access, allowing u.s. companies to own 100% of their chinese joint ventures, many of those companies have been there 10 plus years, which was the original rule that you have to be a joint venture partner for 10 years. many of our companies have been there for more than 10 years. we were talking about the ability for full ownership, to run bigger and bigger businesses. we are talking about it quite a bit. maybe we need to do a better job of making sure everyone is hearing us. >> i mentioned this morning, the reagan administration is incredibly aggressive with respect to import policies they put on tariffs on steel, textiles, motorcycles, autos, sugar
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milt friedman said the reagan administration made it look benign. put reaganve administration on a pedestal, is that the right baseline to judge your -- are you getting a bad rap because we are trying to judge you against the world, a theoretical world of free trade? the right know what baseline is. the right baseline to judge us against is, do we grow the a betterdo we create environment for u.s. citizens, do we put more people to work, do we give them better jobs, does their life get better. two more people end up getting the job they want, to more people have a quality of life they want, do more kids and of going into places they want to go to, people live where they want to live, and at the end of our administration, do people feel like their quality of life, their standard of life, and their future is better than it
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was the day we got here? >if we did that, that's what we should be compared to. >> what do you think is the most important tool for you to do that? fisher-price had a toy factory. to mexico. move the city never really recovered much. what can you do to help bring or keep those kinds of jobs back in murray, kentucky? the taxve to provide a, rates that make corporate's competitive in this country. we have a 35% corporate tax rate. 23.oecd rate is if you look at 23 versus 35, we are not competitive. you can get substantially lower than 23. the president has been constantly talking about rate matters. with taxo start breaks. the first decision we will make
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is, if i build a business and i'm successful, what part do i keep and what part do i give to my shareholders and what part do i give to the government? then we have to have a labor force that is competitive -- compatible to what we need to hire. you have heard a lot of talk about retooling of the labor force, reeducating of the labor force. we are spending an enormous amount of time on apprenticeship programs and vocational education. there's hundreds of welding jobs out there in the world today. we want to build big pipelines in this country. how do you build pipelines? you have to weld them. welding jobs start a decent income levels and grow from there. we have to create an environment where kids coming out of high school are willing to go into a program where they become a -- my, and they start out father was an electrician. this is how he started.
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>> they were so disappointed i didn't go to college and become a welder. >> we have to get the narratives back to what it means to be successful in this country, and how we're going to grow our economy, and how we're going to create an environment that's good for all. and i think we can do it. there's an awful lot of opportunity here. the lng opportunity is enormous here. you look at what they need in japan, what they need in china, and germany, to feed their environment. japan and germany have given up on nuclear power. powereed to replace that with lng. we could be and should be the largest exporter of lng in the world. we have the molecules, we just have not permitted the export. we will permit the export. those are huge construction sites, and huge offering facility. once they get built, it creates an enormous amount of good
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paying jobs. >> it's a great market for you. >> the first thing we are the first thing we will do is permit and lng export facility in the northwest. thing about the northwest of japan versus anywhere else. and we've got to put facilities on the east coast to get to the east coast of germany. >> that is a simple permit process. mr. cohn: the one place we will permit in the u.s. has been turned down twice already. we have to talk about international engagement. you will be traveling with the president. tell me about how you think about those engagements. when the president is down with the counterpart. >> the message is simple. we care about the united states of america. we care about economic prosperity. we care about economic growth. we care about trade. we care about being treated fairly.
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we want to be part of the global economy. we want to be part of the global universe. we don't want to be taken advantage of. we want to work with each and every country out there. we want to treat you fairly and we want you to treat us fairly. we want to be a great partner with each and every one of you. >> you talked about china before coming back here. u.s. very concerned about china relations peered the rhetoric in the campaign was heated on all sides. china is easy billing for us. from an economic rhetoric standpoint. but the meeting with president xi seems to go very well. talk about what that plan looks like. mr. cohn: the meetings went great. we had 24 hours of pretty intense meetings. two big group meetings. and we split into two smaller groups.
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it is part of the small group talking on trade. it we get down to nuts and bolts issues on trade. that was the meeting we talked about the service trade industry. ownership but what they have to do with intellectual property rights. their rules on having software stored on continent. and data stored. international standards and changing import export rules. we've got to get beef going in the next hundred days. we talked to them about a bunch of other issues. we have literally laid out plans for each other where we will try to open up bilateral trade with each other.
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the president got along very well. i think they forged a very good relationship. president xi has extended a formal presentation to come to china. the president would very much like to go to china in the fall. the condition being that we need to continue to make progress on the trade negotiations. the president does not like our trade deficit. he's happy to have it by exporting more to china. we have to export more so that the trade nessus -- deficit narrows quite quickly. would love to have you and the president come speak here. mr. cohn: i'm not sure that
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would be our force in function. launching the process which is a formal negotiation with china, do you foresee similar kinds of negotiation vehicles? or do you plan to come back and rethink what the mechanism looks like? they have been in the hopper for we can walk together and and start running. we get exports at of the united states and into china showing that we can decrease the trade deficit by us exporting. a response, a longer term plan.
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lotthe year plan had a about it. we are saying it is 100 and done. 100 we start and we start working hard. we start really running after the big things move. >> our time is up. we wish you all the best. thank you for coming today. a round of applause. >> you have been listening to , trump's economic adviser at the institute of .nternational finance they covered a lot of ground. gary cohn was treating -- tweeting the mantra of the white house that there agenda is driven by job growth, economic growth, making sure more americans can work and increase american standard of living and quality of life. i thought the conversation got interesting when they talked
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about china specifically because they were starved on details about whether to follow if the summit was a success or not. oliver: that is a good point. he said that they got along very well and that was the narrative that they became sort of best friends over the weekend. but ultimately, we want to reduce the trade deficit in china. it doesn't mean china will stop exporting. it just means to get more in balance. and make mulvaney in the budget office -- present a diversified front. what i thought was interesting was the lng stuff because they talked a lot about energy plans and natural gas which has been a big topic for carl icahn. scarlet: who is advising the president on regulation. energy policy can really be summed up that the u.s. wants to achieve energy independence
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first in the u.s. and then across north america. you will give you more details as the afternoon continues. there is a lot more coming up later today on bloomberg with these administration officials. today, david westin will be speaking to the u.s. office of management and budget director nick mulvaney. you want to keep your eye on bloomberg for that. investors are concerned with the first round of votes. even portfolios that manage risk could be in for a surprise. turning us is president of capital fund management. a quantitative hedge fund with $6.9 billion in assets under management. the worst-case scenario for markets is moving into the final round. there are different ways to slice and dice the outcome. i wonder from where you sit, give us a sense of how investors are positioned heading into the first round vote.
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>> it is hard to position anything if the staff is evenly split to the candidates. they will win the second round. i don't think is a lot of consensus. in position number one. they catch up on the protest vote. jumping to the terminal real quick, the function eu go. you can see the news related to the french election. after that, it does get pretty crowded. what i wanted is a quantitative strategy. and event driven
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trading. been with us, it will be with us. it will stay with us. i think we will overreact to the risk in the market. we broadly look at many events that carry historical risk, political risk, macroeconomic risk. business of managing actual portfolios that are trying to manage and return to a , there are few risks that are pertinent. oliver: do you like volatility? uplippe: i like volatility or down. i am agnostic to the direction. oliver: the magnitude is what matters to you. , the measuresing
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of volatility that remain muted despite all of that? philippe: the market place has its own interpretation of what is risky or not. it could be right or wrong. volatility has a strategy. it is a building block within a portfolio of many other strategies that have different behaviors to particular types of risk. single asset a class carries a lot of risk. volatility mixed in with long-term trend following with equity market mutual, it has a lot less risk. would you think strategies that pick up on volatility have learned from the u.s. election and brexit before that? philippe: we have had it for a very long time. we believe risk is exceptional. it helps us get out of bed and turn on the tv and watch the news. we believe that the current world that we live in is exceptional. it makes the day exciting.
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the world has been exciting for a very long time and will continue to be exciting for a very long time. if you take that into account and build portfolios upstream, you will live in a risky world. you can take a sort of agnostic position. i want to caveat that with market infrastructure. that stuff is really dangerous. things that attract -- affect trading counterparties, regulation and exchanges. those are things that really affect portfolios and have dramatic effect. oliver: be more specific. when you say market infrastructure, what are the vehicles to introduce that kind of risk? if you: -- philippe: have aircraft crashing, that is a piece of market infrastructure that is compromised. that is taken out of the marketplace. scarlet: are any of those plausible? always.:
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i'm not making a prediction that it's going to happen. but do you need to bake that into the cake? yes. you need to make adjustments if these things occur. yes. there is a category of risk that we pay a lot of attention to that has political significance, macroeconomic significance, political, historical. talk about your portfolio because you have different investment vehicles here. you started what you call an alternative data fund. tell us how that is different from what we commonly here is smart ada. -- smart data. it's a balance sheet. smart data is about building better industries. alternative data is about having close to zero correlation on average. not 85 or 90, but close to zero. and having very low correlation
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to data when the market crashes. in order to do that, you have to run in a could he market control portfolio. and you have things like long-term trend following that have different properties than equity market mutual. and things like risk premium that like the market are negatively skewed and tend to crash when the market crashes. but if you do this in a portfolio that is cohesive and ,s managed and implemented taking out the friction of cost. managing risk and implementing signals, you can build something that has robustness over the course of five years, 10 years, 50 years. final question to you. as we look ahead to the french election on sunday. you have been in a difficult position, but where would you want to be given that every possibility is up in the air right now? be where i want to am.
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it have a diversified portfolio across many strategies that have different correlation. to guess any particular outcome, so i want to take an agnostic position and realize my risk. philippe jordan, think you for joining us. coming up sunday on bloomberg television and bloomberg radio, special coverage of the first round of presidential elections live from paris, london, and new york. gura, andacqua, david our across france will be hosting. oliver: president trump just the italian prime minister and will be holding a press conference at 3:50 p.m. washington time. we will bring it to you live when it starts always a bloomberg tv. looking at the upcoming events and everything that is happening. there it is right there.
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restaurants for the past five decades, we will talk about the strategy of growth coming up next. this is bloomberg. ♪
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scarlet: this is bloomberg markets. oliver: if you have been seeing fewer restaurants in the u.s., you're not alone. subway closed hundreds of stores that was a slowdown that was made worse by the emergence of new work rivals. -- new arrivals. this is a cool story not for subway, but an interesting that are used to seeing this ubiquitous chain disappearing. is it competition from sandwich places or chipotles of the world?
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>> it is competition from basically all of the above. subway has fallen a little bit behind the trend. they are not quite as on top of their operations as they used to be. the you said, chipotle and fast casual operators were you go down the line, pick your food, completely customize it, they are everywhere now. scarlet: subway has been trying to adjust to these changes is well with major strategic shifts. for instance, relying on delivery. leslie: it's a little early for delivery so we have yet to see on that. last year, they redesigned the logo and i'm not sure if anyone noticed. on thewere more focused whole jerod vogel scandal back in 2015 and before. they had a tough time getting past that marketing wise. oliver: as we look at this sort of push, americans very much like to take pictures of their food and have sort of fresh
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food. a lot of emphasis on the glamour surrounding it. there are sandwich chains that have emerged. jimmy john's and all these places that people have turned to. .s there something happening leslie: we have seen more sandwich chains pop up and a few national ones. like it's a little better. it is something that maybe even something came from the farmers market down the street. which is kind of ironic because subway coined the whole phrase "eat fresh." oliver: bloomberg reporter leslie patton with food news today. still ahead, president trump and the italian prime minister will hold a joint news conference due to start at 3:50 p.m. eastern time, washington, d.c. time.
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watch live on bloomberg tv or on the bloomberg at tv . we will bring it to you live when it starts. always live and always up to speed. this is bloomberg. ♪
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oliver: this is bloomberg markets. time for options insight with julie hyman. it julie: joining me for today's option inside is randy frederick, vice president of trading and derivative at charles schwab, in town visiting from austin. let's dive right into it in terms of strategy and what you are looking at. financials, i know you like. they have been in the news lately because we have earnings from financials. but they have been battered by what is going on with the yield curve. there was a lot of
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that in anticipation of higher interest rates which most financials make a lot of revenue through the interest rates. and we see a little bit in the last month or so. part of it has to do with money coming in from europe, looking for safety in u.s. treasuries that pushes interest rates down. we see the likelihood of a june interest rate hike come down. the expectations for earnings corporations is 10% from the previous year. we see some of these financials have done quite well. the june rate hike that i think we will get, with the interest rates run up into that. in march.r and also julie: the forecast has been all over the place. the data lately has been softening a little bit. it is strong enough to justify another rate increase? randy: one area that has not
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softened is the labor market. we are in great shape. even with a slight uptick, we are still at a point were we can still see the unemployment rate continue to go down. the broader under limit rate is coming down even more sharply. the economic data is very solid. bit of aeen a little down taken inflation -- a downtick in inflation. it's not what we've seen in the last couple of months. as we get close to that date, the likelihood is that it is going to happen. julie: we have seen the faltering of the reflation trade postelection. that includes for the s&p 500 also. it sounds like your optimism within financials would maybe spread to the entire market as well. is that correct? randy: we have also seen a little bit of a softening on
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tech that didn't take off as quickly as some of the other sectors did. part of it has to do with many of the tech leaders being located in california and not necessarily trumps based supporters, if you will. when the logic came to the market and we have seen a little bit of softening. i believe we have been this way since the election that whenever we get a bit of a pullback, we are only 2% off of the march 1 ties. -- highs. not only in financials but tech and others as well. julie: and let's get to the options part of it. because of compliance you can't give us a specific trade but i want to talk to you briefly about general strategies given some of the investment ideas you are talking about. what kind of strategies are you looking at right now? randy: two strategies are a bullish risk reversal. this is a strategy where you buy a call option on something
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you're optimistic on and pay for it by selling a put off. if this moves up, then you make money on the call and your cost basis is pretty close to zero if it moves down. you can pick it up at a low price. long-term, we're still bullish. i think we will see the market continue to move higher. this is a great strategy for that. you buy something you like and you get out. there are more shares at a lower price. julie: we have to leave it there. back to you guys. scarlet: coming up in a few minutes, president trump and italy's prime minister will hold a joint news conference at 3:50 p.m. washington time. ♪
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mark: it is time for first word news. president trump is doubling down to press canada for changes to its dairy system as part of talks to tweak and aft. the president spoke on the issue
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today at a white house meeting with executives from american steal companies. canada, whatmp: they have done to our dairy farm workers, is a disgrace. it's a disgrace. i have spent time with some of the farmers in wisconsin. rules, regulations, different things have changed. and newers in wisconsin york state are being put out of business. our dairy farmers. mark: canadian prime minister justin trudeau gave his first response to president trump today with an exclusive interview with john micklethwait. he said canada is not the problem for u.s. dairy producers and will stick with the system of protectionist dairy quotas. president trump has just greeted italy's prime minister at the white house. the meeting inss italy next month. the g-7 natio


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